Question 1

When interest rates are very high,the economy is in a liquidity trap,and monetary policy may be ineffective in fighting a recession.

Accepted Answer

A) True 
 B)False

Question 2

Since fiscal policy can be manipulated by partisan political interests:

Accepted Answer

A)  the political business cycle may drive the economic business cycle. 
B)  we may see lower interest rates before elections and higher interest rates after elections. 
C)  the economic business cycle may lead the political business cycle. 
D)  we may see lower inflation and higher unemployment before elections. 
A)  the political business cycle may drive the economic business cycle. 
B)  we may see lower interest rates before elections and higher interest rates after elections. 
C)  the economic business cycle may lead the political business cycle. 
D)  we may see lower inflation and higher unemployment before elections.

Question 3

Which statement is TRUE?

Accepted Answer

A)  Keynes treated short-run macroeconomics as a minor issue. 
B)  Keynes emphasized the short-run effects of shifts in aggregate demand on aggregate output,employment,and prices,whereas the classical economists focused on the long-run determination of the aggregate price level. 
C)  The classical economists believed that the short-run aggregate supply curve was upward sloping. 
D)  The classical economists emphasized the short-run effects of shifts in aggregate demand on aggregate output,whereas Keynes focused on the long-run determination of the aggregate price level. 
A)  Keynes treated short-run macroeconomics as a minor issue. 
B)  Keynes emphasized the short-run effects of shifts in aggregate demand on aggregate output,employment,and prices,whereas the classical economists focused on the long-run determination of the aggregate price level. 
C)  The classical economists believed that the short-run aggregate supply curve was upward sloping. 
D)  The classical economists emphasized the short-run effects of shifts in aggregate demand on aggregate output,whereas Keynes focused on the long-run determination of the aggregate price level.

Question 4

A monetarist rule would be to vary the money growth rate between set limits,such as 3% to 5% annual growth.

Accepted Answer

A) True 
 B)False

Question 5

According to Keynes,changes in business confidence are often responsible for business cycles.

Accepted Answer

A) True 
 B)False

Question 6

The Friedman-Phelps hypothesis claimed that the apparent trade-off between unemployment and inflation would NOT survive an extended period of:

Accepted Answer

A)  rising unemployment. 
B)  rising prices. 
C)  rising interest rates. 
D)  increases in the money supply. 
A)  rising unemployment. 
B)  rising prices. 
C)  rising interest rates. 
D)  increases in the money supply.

Question 7

Challenges to Keynesian economics were based on the:

Accepted Answer

A)  fact that lags in fiscal policy make it relatively ineffective. 
B)  liquidity trap,which makes fiscal policy ineffective. 
C)  possibility of a trade-off between inflation and unemployment. 
D)  usefulness of discretionary fiscal policy. 
A)  fact that lags in fiscal policy make it relatively ineffective. 
B)  liquidity trap,which makes fiscal policy ineffective. 
C)  possibility of a trade-off between inflation and unemployment. 
D)  usefulness of discretionary fiscal policy.

Question 8

According to some economic historians,the first true modern recession took place in:

Accepted Answer

A)  the United States in 1854. 
B)  Britain in 1825. 
C)  Russia in 1860. 
D)  Japan in 1890. 
A)  the United States in 1854. 
B)  Britain in 1825. 
C)  Russia in 1860. 
D)  Japan in 1890.

Question 9

A policymaker who aims at maintaining unemployment at 5% while the NAIRU for this economy is 4% will most likely find the economy running into:

Accepted Answer

A)  deflation. 
B)  inflation. 
C)  a much higher output level. 
D)  a much lower unemployment level. 
A)  deflation. 
B)  inflation. 
C)  a much higher output level. 
D)  a much lower unemployment level.

Question 10

The Great Moderation consensus about macroeconomic policy is that monetary policy:

Accepted Answer

A)  is effective. 
B)  can reduce the unemployment rate below the natural rate. 
C)  makes the economy unstable. 
D)  should follow a policy rule. 
A)  is effective. 
B)  can reduce the unemployment rate below the natural rate. 
C)  makes the economy unstable. 
D)  should follow a policy rule.

Question 11

Use the following to answer questions:  
-(Figure: Fiscal Policy with a Fixed Money Supply)Refer to Figure: Fiscal Policy with a Fixed Money Supply.Assume that this economy is at E1.Now government deficit spending is increased,but the Federal Reserve does NOT expand the money supply.According to this model:

Accepted Answer

A)  real GDP will expand just as much as if the Federal Reserve had expanded the money supply. 
B)  real GDP will decrease because the Federal Reserve did not expand the money supply. 
C)  real GDP will expand,but not as much as if the Federal Reserve had expanded the money supply. 
D)  interest rates will decrease. 
A)  real GDP will expand just as much as if the Federal Reserve had expanded the money supply. 
B)  real GDP will decrease because the Federal Reserve did not expand the money supply. 
C)  real GDP will expand,but not as much as if the Federal Reserve had expanded the money supply. 
D)  interest rates will decrease.

Question 12

Keynes emphasized short-run effects of aggregate demand on aggregate output.

Accepted Answer

A) True 
 B)False

Question 13

Keynesian economics emphasized the:

Accepted Answer

A)  role of money. 
B)  long run. 
C)  impact of changes in aggregate demand. 
D)  impact of changes in aggregate supply. 
A)  role of money. 
B)  long run. 
C)  impact of changes in aggregate demand. 
D)  impact of changes in aggregate supply.

Question 14

In response to the Great Depression,the classical economists:

Accepted Answer

A)  stressed the use of monetary policy over fiscal policy. 
B)  tried to tame the "animal spirits" that caused the recession in the first place. 
C)  stressed the use of fiscal policy over monetary policy. 
D)  did not advocate any action because of the lack of consensus about the consequences of policy. 
A)  stressed the use of monetary policy over fiscal policy. 
B)  tried to tame the "animal spirits" that caused the recession in the first place. 
C)  stressed the use of fiscal policy over monetary policy. 
D)  did not advocate any action because of the lack of consensus about the consequences of policy.

Question 15

If the unemployment rate rose,a classical economist would counsel the government to do nothing.

Accepted Answer

A) True 
 B)False

Question 16

According to the real business cycle theory,fluctuations in output are caused by:

Accepted Answer

A)  fluctuations in the growth rate of total factor productivity. 
B)  changes in aggregate demand. 
C)  changes in the money supply. 
D)  discretionary fiscal policy. 
A)  fluctuations in the growth rate of total factor productivity. 
B)  changes in aggregate demand. 
C)  changes in the money supply. 
D)  discretionary fiscal policy.

Question 17

After 1980,the velocity of money began to:

Accepted Answer

A)  stabilize. 
B)  drift upward. 
C)  drift downward. 
D)  shift erratically. 
A)  stabilize. 
B)  drift upward. 
C)  drift downward. 
D)  shift erratically.

Question 18

The Great Moderation consensus regarding the use of monetary policy to fight recessions is that expansionary monetary policy:

Accepted Answer

A)  is ineffective because the public expects it. 
B)  is harmful because it only increases the aggregate price level. 
C)  has little impact on aggregate demand because of liquidity traps. 
D)  can be used to increase aggregate demand but at the cost of higher aggregate prices. 
A)  is ineffective because the public expects it. 
B)  is harmful because it only increases the aggregate price level. 
C)  has little impact on aggregate demand because of liquidity traps. 
D)  can be used to increase aggregate demand but at the cost of higher aggregate prices.

Question 19

Use of activist fiscal and monetary policy can bring rapid growth,as was the case in the United States before the 1972 election.One consequence of an activist policy is:

Accepted Answer

A)  use of macroeconomic policy that stabilizes the economy. 
B)  a political business cycle caused by the use of macroeconomic policy to serve political ends. 
C)  countercyclical macroeconomic policy designed to help the economy. 
D)  crowding out as decreases in government spending push out the private business spending. 
A)  use of macroeconomic policy that stabilizes the economy. 
B)  a political business cycle caused by the use of macroeconomic policy to serve political ends. 
C)  countercyclical macroeconomic policy designed to help the economy. 
D)  crowding out as decreases in government spending push out the private business spending.

Question 20

A monetary policy rule:

Accepted Answer

A)  occurs when the central bank pursues a formula that determines its actions. 
B)  brings politics into the monetary policy process. 
C)  is the same as discretionary monetary policy. 
D)  is likely to be advocated by Keynesians. 
A)  occurs when the central bank pursues a formula that determines its actions. 
B)  brings politics into the monetary policy process. 
C)  is the same as discretionary monetary policy. 
D)  is likely to be advocated by Keynesians.

When interest rates are very high,the economy is in a liquidity trap,and monetary policy may be ineffective in fighting a recession.

Since fiscal policy can be manipulated by partisan political interests:

Which statement is TRUE?

A monetarist rule would be to vary the money growth rate between set limits,such as 3% to 5% annual growth.

According to Keynes,changes in business confidence are often responsible for business cycles.

The Friedman-Phelps hypothesis claimed that the apparent trade-off between unemployment and inflation would NOT survive an extended period of:

Challenges to Keynesian economics were based on the:

According to some economic historians,the first true modern recession took place in:

A policymaker who aims at maintaining unemployment at 5% while the NAIRU for this economy is 4% will most likely find the economy running into:

The Great Moderation consensus about macroeconomic policy is that monetary policy:

Keynes emphasized short-run effects of aggregate demand on aggregate output.

Keynesian economics emphasized the:

In response to the Great Depression,the classical economists:

If the unemployment rate rose,a classical economist would counsel the government to do nothing.

According to the real business cycle theory,fluctuations in output are caused by:

After 1980,the velocity of money began to:

The Great Moderation consensus regarding the use of monetary policy to fight recessions is that expansionary monetary policy:

Use of activist fiscal and monetary policy can bring rapid growth,as was the case in the United States before the 1972 election.One consequence of an activist policy is:

A monetary policy rule:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Graphs in Economics

Filters

Exam 17: Macroeconomics: Events and Ideas

When interest rates are very high,the economy is in a liquidity trap,and monetary policy may be ineffective in fighting a recession.

Since fiscal policy can be manipulated by partisan political interests:

Which statement is TRUE?

A monetarist rule would be to vary the money growth rate between set limits,such as 3% to 5% annual growth.

According to Keynes,changes in business confidence are often responsible for business cycles.

The Friedman-Phelps hypothesis claimed that the apparent trade-off between unemployment and inflation would NOT survive an extended period of:

Challenges to Keynesian economics were based on the:

According to some economic historians,the first true modern recession took place in:

A policymaker who aims at maintaining unemployment at 5% while the NAIRU for this economy is 4% will most likely find the economy running into:

The Great Moderation consensus about macroeconomic policy is that monetary policy:

Keynes emphasized short-run effects of aggregate demand on aggregate output.

Keynesian economics emphasized the:

In response to the Great Depression,the classical economists:

If the unemployment rate rose,a classical economist would counsel the government to do nothing.

According to the real business cycle theory,fluctuations in output are caused by:

After 1980,the velocity of money began to:

The Great Moderation consensus regarding the use of monetary policy to fight recessions is that expansionary monetary policy:

Use of activist fiscal and monetary policy can bring rapid growth,as was the case in the United States before the 1972 election.One consequence of an activist policy is:

A monetary policy rule:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Graphs in Economics

Filters